Egypt pulls EBRD oil refinery project amid shareholder concerns

Egypt withdrew a $250 million loan request to the European Bank for Reconstruction and Development for an oil refinery modernization Monday, two days before the decisive board meeting, according to bank management.

The money would have gone to the state-owned Alexandria Petroleum Company for a wastewater treatment facility ($100 million), a cooling tower, vapor recovery unit, and energy efficiency measures ($30 million), and to partially fund technology that removes sulphur from car fuel ($120 million) to improve air quality.

For EBRD management, the loan was a chance to engage with Egypt on the country’s low-carbon pathway and reduce carbon dioxide emissions, without increasing the plant’s capacity.

NGOs, however, criticized the project for prolonging fossil fuel infrastructure. Some of the multilateral lender’s 73 shareholders were apprehensive as well.

Projects require a simple majority of the voting power of the banks’ shareholders, the largest of which is the United States, followed by the United Kingdom, France, Italy, and Germany. None of the major shareholders asked by Devex in the past week about whether or not they supported the project answered the question. Consultations between shareholders and management intensified in the run up to Wednesday’s board meeting, which was expected to approve the loan.

Finally, EBRD’s managing director for communications, Jonathan Charles, told Devex by email Monday: “Egypt has decided to withdraw the Alexandria Refinery project. It will not be going to the EBRD Board for consideration this Wednesday.”

Charles referred questions on why the loan was withdrawn and next steps to Egyptian authorities, who did not immediately respond to request for comment.

Just hours before EBRD said it had been withdrawn, Rania Al-Mashat, Egypt’s minister of international cooperation, defended the project, telling Devex by email that it was aligned with the mitigation goals of the 2015 Paris climate accord.

“The proposed investment plans to control emissions, improve water and energy efficiency, reuse of wastewater [and] upgrade production to cleaner Euro 5 standard diesel,” Al-Mashat wrote. “All this without increasing the production volumes, would definitely support the company and the country [in] achieving higher environmental and procurement standards.”

She added that not proceeding with the investment “would certainly negatively impact the environment [by] keeping the present high levels of emissions and energy consumption, in addition to the poor quality of produced fuel which adds more emissions upon usage.”

NGOs welcomed news that the project had been withdrawn.

“It is a clear indication that fossil fuels can no longer expect EBRD's backing, even when disguised as green projects,” Fidanka Bacheva-McGrath, EBRD policy officer at the NGO network Bankwatch, told Devex by email. “Oil is no longer bankable. The bank should build on its track record with private sector solar and wind projects in Egypt.”

Laurie van der Burg, public finance campaign lead at Oil Change International, wrote by email that the withdrawal was “good news” following this month’s COP 26 climate talks in Glasgow, where 39 countries and institutions committed to end public financing for fossil fuels.

“Together [those countries] account for 67% of EBRD's shares, which should mean that EBRD stops financing fossil fuel projects too,” van der Burg wrote. She argued that the Mytilineos gas plant in Greece — also due for approval by the board Wednesday — should be dropped too, as “expanding gas infrastructure is inconsistent with limiting global heating to 1.5C and alternatives are already available and more affordable." The bank declined to comment on the Mytilineos loan.

EBRD’s climate goals include increasing green investments to more than 50% of the total by 2025, and aligning all operations with the goals of the Paris Agreement by the end of 2022.